Court Rules Bitcoin Is Real Money

The court ruled that Bitcoin is real currency and can be regulated as such by the U.S. government.

A U.S. federal judge ruled yesterday that the virtual currency Bitcoin is real money and is subject to regulation by government agencies, according to news sources.

Trendon Shavers, a 30-year-old man recently charged with running a Ponzi scheme using Bitcoin, tried to get his case thrown out by claiming that Bitcoin isn’t real money and therefore is not subject to regulation by the U.S. government.

The court rejected Shavers’ claim yesterday, according to media reports, ruling that Bitocin is real money, and that the Bitcoins invested in Bitcoin Savings and Trust -- Shavers’ hedge fund -- count as securities that are subject to SEC regulation.

Bitcoin was originally founded on the idea that it could not be regulated, since Bitcoins are handled by computer algorithms, opensource Bitcoin applications and a peer-to-peer network, rather than by a central bank.

Despite that original intention the U.S. and other governments have begun taking regulatory actions around the virtual currency. The Department of Homeland Security recently issued a seizure warrant on a Bitcoin exchange. And last month Thailand became the first country to ban Bitcoins.

The Bitcoin community has made efforts to jump ahead of regulators. A number of Bitcoin participants recently banded together to form a self-regulatory organization called DATA.

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio

I'm not very familiar with the algorithms used to create new Bitcoins and limit their availability, so I can't really judge it compared to a central bank's currency. Also, regulating the availability of Bitcoins is also completely different than regulating a real currency for obvious reasons.

I think we are still a long way off from anybody in the U.S. government deciding whether or not to ban bitcoins. Thailand did it because the regulators there just didn't want to be bothered with trying to actually regulate it. We have no idea yet how the U.S. regulators will view Bitcoins and choose to (or not to) regulate it. And that decision will likely be influenced more by how widespread Bitcoin fraud is - and how many more cases like this one have to be investigated and make headlines - then whether or not it is adopted by more people at the point of sale, althought those two things are certainly related.

Considering the case at issue was a guy running a Ponzi scheme and trying to get out of it by claiming the money wasn't real, I'm not sure I'm ready to make a value judgment on whether it's more or less corrupt than traditional currency. But I have read about the limit on total potential bitcoins and that is super interesting. Unfortunately I won't be alive until 2140 to see how it all ends...

Very interesting. Bitcoin needs credibility and now it received some credibility through a court ruling. However, as you note, the ruling that states that "Bitcoin is a real currency" could actually do more harm than good (in the long term).

Yes, I also agree that Bitcoin is real money. Just like fiat currency, it has a finite supply, which is a factor in its valuation by the market when valued against other currencies.But I would also argue that this court ruling means that Bitcoin can now be banned by US government and any other country that has laws that ban currencies that compete with the national currency (which is pretty much every country in the world). Prior to this ruling, jury was out among currency and banking experts as to whether Bitcoin can be officially ruled as real currency. This was also one reason why Bitcoin and other virtual currencies were not very very widely accepted among those who had the means to make use of it. In other words, there was a real risk the virtual currencies can be banned, causing values of those currencies to be wiped out and creating financial ruin for anyone holding significant amounts of those currencies. The banking experts said that it will depend on how courts rule on this matter and now we have the first one. Even some Bitcoin proponents discouraged hoarding Bitcoin or investing in it because of various risks. I've heard some Bitcoin advocates try to argue that Bitcoin was not real money in a desperate attempt to avoid government ban, but they were simply playing with semantics and fooling themselves. For example, some tried to argue that Bitcoin was like a credit card and not a real currency, but credit cards are fundamentally different. Bitcoin is just as real as dollar and other fiat currencies.In the short term, there probably won't be any rush by the US and other governments to ban Bitcoin since it is still not widely used to pay for goods and services, and it is mostly used as a way to transfer money, but at the first sign that it is gaining wider acceptance among merchants, US and other governments will move to ban it. With the court rulings in place, there will be no other legal recourse for the Bitcoin proponents.I'm very surprised that the article did not cover this potentially catastrophic outcome for Bitcoin that can result from this court ruling.